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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. A firm that has market power in the factor market (a wage-setter)






2. The ability to set the price above the perfectly competitive level






3. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit






4. When firms focus their resources on production of goods for which they have comparative advantage






5. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources






6. A legal maximum price above which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent shortage






7. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK






8. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.






9. An economic system based upon the fundamentals of private property - freedom - self-interest - and prices






10. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity






11. A good for which higher income increases demand






12. For one good - constrained by prices and income - a consumer stops consuming a good when the price paid for the next unit is equal to the marginal benefit received






13. A good for which higher income decreases demand






14. Ed = 0 - no response to price change






15. AFC = TFC/Q






16. MUx / Px = MUy/Py or MUx/MUy = Px/Py






17. A very diverse market structure characterized by a small number of interdependent large firms - producing a standardized or differentiated product in a market with a barrier to entry






18. A period of time too short to change the size of the plant - but many other - more variable resources can be changed to meet demand






19. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.






20. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur






21. A measure of industry market power. Sum the market share of the four largest firms and a ratio above 40% is a good indicator of oligopoly






22. Ei = (%dQd good X)/(%d Income)






23. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good






24. Two goods are consumer substitutes if they provide essentially the same utility to consumers






25. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.






26. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied






27. Goods that are both nonrival and nonexcludable. One person's consumption does not prevent another from also consuming that good and if it is provided to some - it is necessarily provided to all - even if they do not pay for that good






28. A per unit tax on production results in a vertical shift in the supply curve by the amount of the tax






29. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product






30. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good






31. The difference between total revenue and total explicit costs






32. The upward part of the LRAC curve where LRAC rises as plant size increases. This is usually the result of the increased difficulty of managing larger firms - which results in lost efficiency and rising per unit costs.






33. Exists at the point where the quantity supplied equals the quantity demanded






34. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity






35. Ed = 8 - infinite change in demand to price change






36. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.






37. The practice of selling essentially the same good to different groups of consumers at different prices






38. AVC = TVC/Q






39. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good






40. Pm > MR = MC - which is not allocatively efficient and dead weight loss exists. Pm > ATC - which is not productively efficient. Profit > 0 so consumer surplus is transferred to the monopolist as profit






41. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good






42. ATC = TC/Q = AFC + AVC






43. The output where ATC is minimized and economic profit is zero






44. Total product divided by labor employed. APL = TPL/L






45. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price






46. Ed = (%dQd)/(%dP). Ignore negative sign






47. The rational decision maker chooses an action if MB = MC






48. Additional benefits to society not captured by the market demand curve from the production of a good - result in a price that is too high and a market quantity that is too low. Resources are underallocated to the production of this good






49. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand






50. Holding all else equal - when the price of a good rises - suppliers increase their quantity supplied for that good